Why is reward rhetoric so divorced from reality and is it time for a change, asks Duncan Brown
JK Galbraith said that there are two kinds of forecasters: those who don’t know; and those who don’t know they don’t know. In mid-2008 we are all writing about total rewards packages and Best Places to Work. None of us predicted or foresaw the five years of real pay cuts that the majority of employees in the UK have suffered.
And while my teaching has become increasingly focused on the concept of total reward strategy, so reward professionals in practice appear to have been becoming increasingly isolated and divorced in their organisations, referred to in a recent Institute of Employment Studies study of the HR function as ‘bogged down HR’.
This ‘rhetoric versus reality’ gap, according to Professor Steven Bevan, is widest in the rewards field. Fewer than half of UK employers actually have a defined total rewards strategy and only 20 per cent operate a flexible benefits plan. Mention ‘total rewards’ in any employee focus group and you hear about pay freezes, zero hours contracts and work intensification for no extra cash, rather than the ‘total rewards approach’ of the recruitment websites.
A major charity I work with specifically rejected the term when re-designing its reward practices, referring instead to employment principles and practices, as being more in keeping with the current social climate.
Are we about to see a shift from total rewards to smart rewards?
In her new autobiography Hard Choices, Hilary Clinton talks about the need to abandon the Manichean, inflexible, ideology-driven policies of her predecessors in our complex and unpredictable world.
In rewards management, we need to move from generic total rewards strategies and ‘chocolate box’ flexible benefits plans to ‘smart rewards’. I’d characterise it as follows:
A simpler, clearer, more flexible focus on a few core values and reward principles. One employer I have been working with has done a great job in integrating their employee recognition programmes and focus them on their five core values, so that outstanding customer service for example really is recognised and rewarded.
It is less a leap of faith and more evidence-based with clear measures of success and effectiveness. We also need to be much effective using financial data, showing the costs and benefits of reward changes, the major risks and how they are being managed.
Smart rewards put a stronger emphasis on engaging employees and meeting their needs with rewards, not just being ‘top-down’ business and costs-driven.
They have less of a focus on desire and design and more emphasis on communications and delivery.
The smart reward functions recognise transparency is inescapable in modern society. They map out their reward plans as a change management exercise, have detailed communications strategies, and even embrace social media to get their message across.
The HR director of a pharmaceutical company told me that “the reward strategies I like are the ones that work”.
Adopting a smart rewards approach is more likely to differentiate your organisation and enable you to practice your policy objectives of genuinely business-enhancing and employee engaging rewards.